Managing a Beneficiary with a Substance Use Disorder

Practical guidance for trustees and fiduciaries confronting the challenge of administering assets for beneficiaries with active or historical substance use disorders.

Understanding the Clinical Landscape

Before making trust administration decisions, fiduciaries should develop a baseline understanding of substance use disorders as clinical conditions. The National Institute on Drug Abuse (NIDA) defines addiction as "a chronic, relapsing disorder characterized by compulsive drug seeking and use despite adverse consequences." This characterization has important implications for fiduciary decision-making: it frames the beneficiary's condition as a medical disorder rather than a moral failing, and it acknowledges relapse as a characteristic feature of the condition rather than evidence of treatment failure.

The chronicity of substance use disorders means that fiduciary management is typically a long-term engagement rather than a crisis-and-resolution scenario. The beneficiary may cycle through periods of active use, treatment, recovery, and relapse over years or decades. Trust administration strategies must be designed for this longitudinal reality rather than for a single acute episode.

Fiduciaries should understand the basic continuum of care in addiction treatment: medical detoxification (typically 3-10 days), residential treatment (typically 28-90 days, though longer stays are increasingly common in premium programs), intensive outpatient treatment (structured therapy while living independently), outpatient treatment (ongoing therapy and monitoring), and recovery support services (sober companions, recovery coaches, peer support). Each level of care has different cost implications, and trust distributions may need to accommodate transitions between care levels as the beneficiary's needs evolve.

The Initial Assessment Phase

When a fiduciary first becomes aware that a beneficiary has a substance use disorder, the priority should be gathering sufficient information to make informed administration decisions. This typically involves reviewing the trust instrument for any provisions specifically addressing beneficiary incapacity, substance use, or behavioral health conditions; consulting with legal counsel regarding the fiduciary's obligations and options under applicable state law; engaging a behavioral health consultant or care management firm to provide an independent assessment of the beneficiary's condition and needs; and establishing communication protocols with the beneficiary that respect their autonomy while acknowledging the fiduciary's duty of care.

The engagement of a behavioral health consultant serves multiple purposes. It provides the fiduciary with clinical expertise that informs distribution decisions. It creates a documented record of professional consultation that supports the fiduciary's decision-making process. And it may facilitate communication with the beneficiary about treatment options and the relationship between trust administration and behavioral health management.

Administration Strategies

The Structured Distribution Approach

Rather than making lump-sum distributions, the fiduciary establishes a structured distribution framework that provides for the beneficiary's legitimate needs while minimizing the risk of fund diversion. This typically involves direct payment of housing costs, utilities, and insurance premiums; direct payment of treatment and healthcare costs; provision of a managed spending allowance (potentially through a monitored credit card or spending account); and periodic review and adjustment of the distribution framework based on the beneficiary's clinical progress.

The Care Management Model

In the care management model, the fiduciary retains a professional care management firm to coordinate the beneficiary's behavioral health care and to serve as an intermediary between the fiduciary and the clinical treatment team. The care manager can assess the beneficiary's clinical needs, recommend appropriate treatment providers, monitor treatment progress, and advise the fiduciary on distribution decisions that affect the beneficiary's care. Firms operating in this space include O'Connor Professional Group, which serves family offices and fiduciaries nationally. For physicians coordinating care alongside fiduciaries, clinical vetting frameworks can inform the selection of appropriate treatment providers.

The Co-Fiduciary Approach

When the trust instrument permits, appointing a co-fiduciary with behavioral health expertise (or appointing an institutional fiduciary with a behavioral health advisory relationship) can strengthen the administration of trusts with behaviorally complex beneficiaries. The co-fiduciary model distributes decision-making responsibility and provides a built-in consultation mechanism for distribution decisions that implicate behavioral health considerations.

Communication with the Beneficiary

The fiduciary's communication with a beneficiary who has a substance use disorder requires sensitivity and intentionality. The beneficiary is likely to perceive trust restrictions as punitive unless the fiduciary communicates the rationale clearly and empathetically. Key principles include acknowledging the beneficiary's autonomy and dignity; framing trust administration decisions in terms of the beneficiary's wellbeing rather than punishment or control; providing clear explanations of distribution decisions and the criteria that will be used to adjust distributions over time; maintaining consistency in communication and decision-making; and avoiding language that stigmatizes the beneficiary's condition.

When the beneficiary is in active use or acute crisis, communication may need to be channeled through a care manager, interventionist, or clinical professional rather than conducted directly by the fiduciary. The fiduciary's role is administrative and fiduciary, not clinical, and attempts to engage directly with a beneficiary in crisis can be counterproductive for both the fiduciary relationship and the beneficiary's care.

Treatment Funding Decisions

Trust-funded treatment raises several practical questions for fiduciaries. Premium residential treatment programs can cost $30,000 to $120,000 per month or more. In-home treatment arrangements involving sober companions, private clinicians, and care management can cost $50,000 to $150,000 per month. Extended aftercare — including sober living, outpatient therapy, recovery coaching, and monitoring — can cost $10,000 to $30,000 per month for 12 to 24 months.

The fiduciary must evaluate whether these costs are reasonable and appropriate given the trust's assets, the beneficiary's needs, and the terms of the trust instrument. This evaluation should consider the clinical recommendation of qualified professionals (not the marketing materials of treatment programs), the beneficiary's treatment history and what has or has not been effective previously, the program's accreditation and clinical credentials, and the expected duration of treatment and the total projected cost.

Due Diligence on Treatment Programs: The luxury treatment market includes both clinically excellent programs and programs that charge premium fees primarily for amenities rather than clinical quality. Fiduciaries funding treatment from trust assets have a duty to evaluate program quality, not merely program reputation or price point. Accreditation by the Joint Commission or CARF International, clinical leadership by board-certified addiction psychiatrists, and the use of evidence-based treatment modalities are meaningful quality indicators.

Documentation and Record-Keeping

Thorough documentation is the fiduciary's most important protection in managing a trust with a behaviorally complex beneficiary. The fiduciary should maintain records of all distribution decisions and the reasoning behind them, all consultations with legal counsel, behavioral health professionals, and care managers, all communications with the beneficiary regarding trust administration, all treatment-related expenditures and the clinical justification for each, and all modifications to the distribution framework and the circumstances that prompted them.

This documentation serves both as a record for potential judicial review and as an institutional memory that ensures continuity if the fiduciary changes or if multiple professionals are involved in trust administration over time.

Long-Term Considerations

As the beneficiary progresses through recovery, the fiduciary's administration strategy should evolve accordingly. A beneficiary who has maintained sustained recovery — typically assessed at one year or more of continuous sobriety, active engagement in recovery support, and stable functioning — may warrant a gradual relaxation of distribution restrictions. The concept of the clinical window during care transitions applies here as well: fiduciaries should recognize that the post-treatment period represents both heightened vulnerability and heightened opportunity for lasting change. This evolution should be guided by clinical assessment rather than arbitrary timelines, and should be documented as carefully as the initial restriction decisions.

The fiduciary should also plan for the possibility of relapse, which is a common feature of substance use disorders. A relapse contingency plan — establishing in advance the criteria that would trigger a return to more restrictive distribution practices — can prevent the reactive, crisis-driven decision-making that often leads to suboptimal outcomes for both the fiduciary and the beneficiary.